Jared Bernstein, an economist at the left-leaning Center on Budget and Policy Priorities, summarized the Fed's new policy stance as "Don't just do something, stand there!" He added that the new approach "seems right to me." Mr. Bernstein said domestic growth was under pressure from tighter financial conditions, the slowdown in global growth and what he called "Trumpian chaos."

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For the last several years, the Fed said consistently that it planned to keep raising interest rates. The pace was uncertain, but the direction was clear. Wednesday's statement omitted previous language indicating that "some further gradual increases" would be warranted. Instead, it said the Fed would be "patient" in evaluating the health of the economy. And it suggested the Fed stood ready either to raise or to cut rates, depending on economic conditions.

Reinforcing this more cautious tone, the Fed also announced in a separate statement that it was prepared to slow or even reverse the steady slimming of its bond portfolio. This, too, was a striking shift. The Fed said in December that it was committed to steadily reducing its holdings of Treasuries and mortgage bonds, which it amassed during the financial crisis to help bolster the economy.

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While the Fed is pausing for now, Mr. Powell said he believed the central bank had raised rates to an appropriate level and had not overtightened. "I think our policy stance today is appropriate for the state of the economy," he said. "That's my feeling."